Respuesta :
Exploiting a disequilibrium between spot rates, forward rates, and differences in interest rates exists named Covered interest arbitrage.
What is Covered interest arbitrage?
Using advantageous interest rate differentials to invest in a currency that pays a higher yield while hedging the exchange risk using a forward currency contract is known as covered interest rate arbitrage. By employing a forward contract to cover exchange rate risk, an investor can profit from the difference in interest rates between two nations using the covered interest arbitrage trading method.
Arbitrage is a type of trading that almost completely eliminates risk by taking advantage of market inefficiencies. This arbitrage strategy has gained popularity because to the near-instantaneous transaction capabilities of technical traders.
Hence, Exploiting a disequilibrium between spot rates, forward rates, and differences in interest rates exists named Covered interest arbitrage.
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